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A standard deduction is basically a deduction allowed in income tax, regardless of the expenses or investments made by an individual.
No disclosure/proof of investment/expense bills are required for this type of income tax standard deduction as it is allowed at a standard rate.
In India, there are 2 types of standard deduction, as mentioned below:
- Standard Deduction from Rent: Standard deduction @ 30% is allowed for income from rent.
- Standard Deduction from Salary: Standard deduction of Rs. 50,000 is allowed from salary income
Standard deduction from rental income @ 30%
Rental income is classified under the head: income from house property, The person earning the rental income is first allowed to deduct other taxes paid to the municipality and local authority to arrive at the net annual value.
Further deduction under section 24 is also allowed from the net annual value. it is explained below
| Gross Annual Value (ie actual rent or expected rent, whichever is higher) | XXX | |
| (low) | Municipal and other taxes paid to the local authority | (xxx) |
| , | Net Annual Value (NAV) | XXX |
| (low) | Section 24. cut under | |
| 1. Statutory Deduction @ 30% of NAV | (xxx) | |
| 2. Deduction for interest on loan | (xxx) | |
| , | Income chargeable under head house property | XXX |
The standard deduction applicable to rental income is regardless of the actual expenses incurred on the property. Any expense incurred to keep the property in a healthy condition such as maintenance etc. is covered under this standard deduction. Proof of actual expenses incurred need not be maintained.
If a person is receiving rent from multiple properties, then this standard deduction of 30% will be allowed to be claimed from all the properties.
It is pertinent to note here that this standard deduction is allowed only from the rent received from letting out an apartment/building and not from the rent received from it. vacant land rent,
standard deduction from salary
Standard deduction from salary of Rs. 50,000 was introduced in the budget 2019 and is applicable for the financial year 2019-20.
This deduction is allowed irrespective of the actual expenditure incurred by the employee. The employee is also not required to submit any bill/proof to the employer for claiming this deduction.
This deduction is offered in lieu of Transport Allowance and medical reimbursement Which was earlier allowed to the employees and the employees were required to submit the bill as proof to claim these benefits. The deduction for transport allowance and medical reimbursement has now been done away with and replaced by the standard deduction.
This is a cumulative deduction and if you have received salary from 2 employers during the year, then the maximum standard deduction allowed will remain the same which is Rs. 50,000 (in total). Whether you have received salary income from a large company or a small proprietorship – you will be allowed to claim the standard deduction.
Other deductions allowed in income tax
Apart from the standard deduction @ 30% mentioned above, several other deductions are also allowed. Some of these deductions are available only to salaried employees while the remaining deductions are available to everyone, including salaried employees.
Deductions that are limited to only salaried employees are deduction for entertainment allowance and deduction for Professional tax, In addition to these deductions, there are several exemptions available for salaried employees.
Other deductions that are available to everyone include the deduction for investments. PPF, Equity Mutual Fund, life insurance, repayment of education loan, medical insurance premium payment, Deduction for contribution to NPS account e.t.c.
These deductions are briefly explained here – 11 Income Tax Deductions That Can Help You Reduce Your Tax Burden,
The government encourages taxpayers to use the above deductions to plan their taxes in advance which will help them reduce their tax burden.
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